Hayek’s Europe: The Austrian school and European federalism

Although the efforts of modern classical liberals revolve primarily around an intellectual agenda for the domestic reform of institutions and policies leading to a reduction in the size, scope and discretionary powers of the state, it is impossible to dissociate them from questions of the international economic order. The connection between the two was particularly vivid to the founding generation of the Mont Pelerin Society (MPS), an association which reunited liberal scholars and reinvigorated the intellectual movement, which then enjoyed the heyday of its influence during the Thatcher and Reagan years. Among MPS’ founding figures, a number of prominent thinkers were vocal proponents of international federalism: a program that would simultaneously push for the decentralisation of states, while embedding them within a supranational framework that would curb their capacity to wage war and engage in protectionist and mercantilist policies.

When the Walter Lippmann Colloquium, a precursor to the Mont Pelerin Society, convened in Paris in August 1938, the most pressing items on the agenda included countering the excesses of nationalism, militarism, and the rise of totalitarian ideologies, which were dragging Europe into war. The agenda of the meeting thus included sessions on the “co-existence of liberal and totalitarian economies,” “economic and psychologic policy of liberal states toward totalitarian ones,” “economics of war,” “economic policy of liberal states between themselves,” and other pressing questions of international political economy (Hartwell 1995: 21). The attendees included the polymath Michael Polanyi (1891-1976), Austrian economists Ludwig von Mises (1881-1973) and Friedrich von Hayek (1899-1992), Jacques Rueff (1896-1978), the future advisor to President de Gaulle, as well as Wilhelm Röpke (1899-1966) and Walter Eucken (1891-1950), the doyens of German “Ordo-liberalism,” the group of scholars which paved the way for the German “economic miracle.”

The founding meeting of the Mont Pelerin Society in April 1947, which also included key figures of classical liberal thought in America, such as Milton Friedman (1912-2006), Aaron Director (1901-2004), and Frank Knight (1885-1972), featured sessions on “The Future of Germany” (Röpke opened the discussion) and “Problems and Chances of European Federation” (the discussion was opened by Bertrand de Jouvenel (1903-1987). The meeting, which already revealed significant fault lines within liberal thought – including on questions of social and cultural conservatism and the proper role of government within the economy – took place at a time when the contours of the post-war international order were still uncertain. Communist parties, heavily supported by Stalin, were on the rise in Western Europe, the Marshall Plan was still months away, and the prospects of another conflict or a Soviet takeover of the continent were far from hysterical.

Buy the full chapter here.